Tax Troll explains the results of the "cliff" legislation ...

As someone has already said in another thread, Obama got most of what he wanted, but not all.
The main differences:
1. Temporary tax rate reductions set by "W" will remain, except for those taxpayers with income over $400K ($450K for married couples), which go back to a 39.6% marginal rate. (Before the temporary cuts, the highest bracket kicked in around $200K lower than that.)
2. The 2% reduction in employer portion of Social Security tax did NOT get extended. Therefore, most employees will see their pay checks decrease by that percentage, starting immediately.
3. Long term capital gains (and qualified dividends) will continue to be taxed at a lower rate than regular income, maximum 15% for all except those above the $400K/$450K levels mentioned in #1, who pay 20%.
4. The temporary elimination of income phaseouts of some itemized deductions and the personal exemption were NOT extended past 2012, but the new legislation starts the phaseouts at a higher AGI than before, so it will affect fewer taxpayers.
Some of the good news: Most of the expiring tax credits have been extended through 2013, including the American Opportunity Tax Credit for education (much more generous than the Hope Credit), and even the home Energy Credit, at its old 2011 level. The AMT has been indexed for inflation, so it is unlikely to hit middle income taxpayers (which would otherwise have happened). State sales taxes can still be deducted, as an alternate to state income tax, on Sch A. The above-the-line deductions for educator expenses and tuition have been extemded, as has the temporary relief from having to recognize income on a short sale or foreclosure on your main home, if worth less than the mortgage debt.
One note of caution: Some of the items extended (such as AMT relief) have technically been made "permanent" in the law. Before you start doing cartwheels to celebrate, keep in mind that NOTHING in tax law is ever really "permanent," as everything is subject to revision by our elected officials.
We got over this hump, but we're in for a bumpy ride, folks ...

TaxTrollEA

Note to those who do their own tax return: Don't be in a hurry to buy or download software yet. Pending the resolution of the expiring tax provisions (many of which would have affected 2012 taxes), the IRS had only "draft" versions of most tax forms (including the main form, the 1040) available to software companies up to now. They'll be working overtime to get the forms out over the next week, and most software providers will likely have them available around the middle of January. If you already have your software, look for updates before you try to use it.
Originally, the IRS stated that they would be ready to start accepting tax returns - electroinically or on paper - on Jan 22nd. No word yet, but I'm guessing they'll push that back about 5-7 days. So there is really no rush.
"But TaxTroll, what about those commercials for Jackson Hewitt that say you can file NOW and don't even need your W-2?"
Unless you managed to read the teeny tiny fine print that flashed across the screen, you don't know that they MEANT you can come in, get an ESTIMATE of what you might get back or owe, and then file when (1) you have your W-2, which is required, and (2) the IRS is ready for you. Again, I'd suggest you hold back a while, until the crazy dust settles.

TaxTrollEA

TaxTroll
So, are you saying that taxes will go up the most on the poor?
None of the tax exemptions you mention apply to the bottom 40%, but the payroll tax will mean they take home 2% less each week.
How can people defend Obama and the Democrats when they raise taxes on the poorest?
For someone making $26,000 a year, their taxes go up at least $520 a year, no matter what.
How is that fair?

So the Republicans got what they wanted: economic slowdown, caused by taking 2% from the middle class who actually drive the economy.
Well, at least it re-establishes the principle of progressive taxation. It is still worth it on that basis alone.

Thanks, Tax Troll.

Obama lied and caved.
Obama campaigned on a $250,000 limit regarding the Bush-era tax cuts. But with his cave decision to allow this limit to be raised to $450,000, Obama is keeping 99 percent of the Bush-era tax cuts. 99 PERCENT! Permanently. Obama has no balls.
But payroll taxes go up for the middle class. They were allowed to expire and were never even up for discussion. For example, if you earn $50,000 a year, you'll be receiving at least $1,000 less in your paycheck this year. Even minimum wages earners will receive up to $400 less.
Obama lied and caved to keep 99 percent of the Bush-era tax cuts.

R5
Which pisses you off more-
-The fact that Obama is murdering innocent children in the middle east?
-Or the fact that your taxes are going up by (at least) 2%?
I think taxes are theft and evil, but I would prefer higher taxes to knowing my country is killing innocent people.

Tax Troll! I love thee...
Quick question:
In December 2011, I sold a business and earned a small monthly stipend off the sale from January-April because the new owner could only pay me in installments instead in bulk (he didn't have the start up capital). In May, the business was sold again and then sat in escrow hell until today, when I got all the monies owed to me! During 2012, I made zero income except that small monthly stipend for the first four months. Do I have to file IRS returns? The "stipend" wasn't actually income, but maybe capital gains? I apologize for being a total moron.

THANKS%21%21%21

R6. R5 is not setting up an "either or" question about two different topics. Instead, that post is a commentary on gutless negotiations by all parties concerned including Obama.
Another thing, Congress (and the president for that matter) ought to be ashamed of themseleves for doing everything at the last minute. There should be time allowed for public debate--not doing something so important as the 'fiscal cliff' on fucking New Year's Eve when it's impossible for the legislators to debate or for the public to even make a phone call to a Congressional representative.

R8-
It's THEATER! It MUST be dramatic, and make you feel something- even though you know you're getting screwed!
Do you really think it is material whether they cut .01% on this or that, or raise taxes on the rich by .01%?
No, but it distracted you from the fact that your taxes are going up by 2% a year!
DC is Hollywood for ugly people, and they fooled you.

[quote]So the Republicans got what they wanted: economic slowdown, caused by taking 2% from the middle class who actually drive the economy. Well, at least it re-establishes the principle of progressive taxation. [bold]It is still worth it on that basis alone.[/bold]
To whom? It's not worth it to me personally and I can't see that the country gained much tax revenue.

R10-
It's worth it IDEOLOGICALLY! As long as they can raise taxes, it's worth it, and it doesn't matter that people earning less that $70k a year will pay the most.
At $70k/yr, you'll be paying an extra $+1400 a year, even though the tax breaks and subsidies in the bill go to Hollywood, big oil companies, insurance and pharmaceutical companies and god knows who else got "perks".
But at least it FEELS like you won!
Did you vote for Ron Paul? If not, then shut up and quit bitching- you got what you deserved.

R8
Your naïveté makes me laugh.
As if these people in DC cared about you. You are just a sheep to be sheared, a cow to milked...and then slaughtered.
It's so quaint that you think that your overlords in DC give a fuck about you.
But, you didn't answer the question- kill babies in Afghanistan, or raise taxes?

R6

Just to clarify, the "Bush Tax Cuts" were temporary. These taxes have no expiration date, so they are now the OBAMA TAX RATES.

[quote]Just to clarify, the "Bush Tax Cuts" were temporary. These taxes have no expiration date, so they are now the OBAMA TAX RATES.
And, the fact that these tax cuts are no longer temporary and subject to a continually rolling expiration date, takes pressure off the Rethuglicans in future financial negotiations. One bit of leverage against the Repukes -- gone.

Payroll tax: isn't that for social security and unemployment insurance? So doesn't that mean it's coming back to us eventually?

Quick question:
[Q]In December 2011, I sold a business and earned a small monthly stipend off the sale from January-April because the new owner could only pay me in installments instead in bulk (he didn't have the start up capital). In May, the business was sold again and then sat in escrow hell until today, when I got all the monies owed to me! During 2012, I made zero income except that small monthly stipend for the first four months. Do I have to file IRS returns?
Depends on several things not apparent in your question, including how the original sale was reported on your 2011 return. If you did NOT elect installment reporting, and paid all of the tax on the sale that year, there would be no tax on the rest of the gain you received in 2012.
But, depending on exactly how this "stipend" was determined, there may be some taxability there. Again, depends on specifics we can't really go into here. I'd suggest you bring the paperwork to a capable tax professional and let them look it over.

TaxTrollEA

Thank you, Tax Troll!!

I won't engage any of you in a "whose fault is it" debate, except to point out the obvious:
Obama didn't raise any taxes, on anyone. EVERY one of the increases was simply the result of the expiration of a temporary, non-sustainable cut that went into effect, most under the previous administration. There was no money to extend them all, so this is the compromise that CONGRESS agreed to.
As far as the 2% Social Security tax bump, again, this was a temporary reduction that was NEVER meant to be permanent. Obama wanted to extend it another couple of years, Congress said no.

TaxTrollEA

Sanity rules, if at least for a minute...
Thanks, Tax Troll!

Tax Troll, you're a prince. Thanks.

love u tax troll!!!

Thanks tax troll-
In the original negotiations the top inheritance tax rate was going to return to Clinton levels (55% I believe). Did the new bill do this, or are they left at the lower Bush levels?

TaxTroll is the one DLer who could get laid in any town in America, out of sheer gratitude for all the smart, understandable advice.

If%20you%27re%20ever%20in%20Chicago...

R22, the tax for estates worth $5 million or more will rise from 35 to 40 percent. And that $5 million is now indexed to inflation.
There is an additional factor with respect to the capital gains rate, in that while the bill does return the rate to 20%, there is an additional 3.8% surcharge that's part of the Affordable Care Act, so the capital gains rate for the wealthy will actually be 23.8%.

Paul

[quote] there is an additional 3.8% surcharge that's part of the Affordable Care Act, so the capital gains rate for the wealthy will actually be 23.8%.
That's above a certain AGI, though, right? It was proposed for incomes more than $200,000 (after all the deductions). I wonder if it's now for incomes above $400,000?

You're right, R25. I'm having trouble finding a definitive answer to your question, though. I don't know whether the fiscal cliff bill modified the ACA income limit or not. I suspect that it did not but can't confirm that.

--In the original negotiations the top inheritance tax rate was going to return to Clinton levels (55% I believe). Did the new bill do this, or are they left at the lower Bush levels? --
You are correct that the estate tax was scheduled to increase to a maximum rate of 55%, with a credit shielding only the first $1 million in assets.
The "cliff" legislation changed that to a $5 million exclusion, with a maximum rate of 40%.

TaxTrollEA

Some of you had questions about the 3.8% Medicare surtax on unearned income (which includes, but is NOT limited to, long term capital gains), effective in 2013 under the Affordable Care Act ...
The tax is applicable to taxpayers with adjusted gross incomes (after adding back any exclusion due to foreign earnings) of $200K single, or $250K for married joint. (So, it applies to some people who are still entitled to the lower 15% LTCG rate, not just the over $400K folks paying in the highest tax bracket and the 20% LTCG rate)
The tax is computed separately, at 3.8% of the LESSER of:
1. your investment income*, or
2. the amount by which your (modified) AGI exceeds the $200K/250K cap.
*Net investment income is interest, dividends, annuities, royalties, rents (except for those in business of renting personal property), plus net capital gain.

TaxTrollEA

[quote]...as has the temporary relief from having to recognize income on a short sale or foreclosure on your main home, if worth less than the mortgage debt.
Tax Troll, does this provision also encompass a negotiated reduction of principal (i.e., no sale or foreclosure) on a primary residence that is under water? Or would that now be taxable (as was before) as cancellation of debt income?

undefined

Paul, is that a marginal rate above 5 MM like income tax scales?

R22

Everything below $5 million is protected, so that you can pass your small business, home, etc., on to your heirs without being taxed. If you have a $6 million estate, only $1 million of that is subject to taxation.

Thank you!

R22

I'm not defending this new so-called "plan" at all...I'm furious that the threshold on higher taxes didn't begin with $250K/year instead of $400K.
That having been said, I was not at all in favor of the payroll tax cut when it went into effect, and I am decidedly middle-class. The reason being that this is the tax that is critical to shoring up Social Security so that it will be solvent for a much longer period of time. Cutting it 2% and leaving it at that was a recipe for disaster. And for a person making $50K per year, the additional 2% comes out to about $19.00 per week. I doubt seriously that that is going to force someone into bankruptcy (and, if so, they have more problems that what their tax rate is).
They should also have raised the ceiling on taxable income for SS taxes to at least $125K/year or more instead of the current $110K/year. Why should most of us get taxed on 100% of our annual income while people making in excess of $150K/year only get taxed on the first $110K of their income? Not to mention those making millions per year. Whackiest thing I've ever heard of in my life.

"Why should most of us get taxed on 100% of our annual income while people making in excess of $150K/year only get taxed on the first $110K of their income?"
Because it's not a "tax", it's a contribution to a retirement program. The more you contribute, the higher your eventual benefits will be. So unless you either change the program to a form of welfare, or remove the cap on benefits that higher income contributors receive, you need to cap the contribution.

I know this is off topic, but I need the help of the fabulous tax troll!
My partner and I went through a short sale in 2012, and are expecting a 1099 for the "lost" amount. Since we are not married in the eyes of the IRS how to we "split" this 1099 between our two returns? For what it's worth I paid the mortgage, and always claimed the interest on my taxes in the past. Mortgage and deed, however, were in both our names. Thanks!

--My partner and I went through a short sale in 2012, and are expecting a 1099 for the "lost" amount. Since we are not married in the eyes of the IRS how to we "split" this 1099 between our two returns? For what it's worth I paid the mortgage, and always claimed the interest on my taxes in the past. Mortgage and deed, however, were in both our names.--
Assuming you were tenants in common or JTWROS, you each own half of the property ... so that is what you report as sold, at zero gain. The lender should issue Form 1099A (and likely 1099C) detailing your HALF of the sales price, value of the property and amount of the underlying debt at the time of the sale. You would each file the necessary paperwork (Generally, Form 982) to exclude your half of the forgiven debt, up to the statutory maximum of $1 million EACH (It's $2 mil for a principal residence, and you each get to use half.)
R29, to answer your question, the exclusion does not apply to principal reductions that are NOT in connection with a short sale or foreclosure. However, you may be able to exclude the debt if you are financially insolvent at the time of default; See Form 982 and its instructions.

TaxTrollEA

TT: my RDP and I lived in CA for the first 5 months of this year. We now live in FL, which has no state income tax.
When we file our CA tax form, we will report the 5/12ths of our income rec'd while we were living there.
Last year IRS allowed us to file as married, but how do we handle this year's return?
Do we file 2 Fed returns: one reporting 5/12ths as married, and anther reporting 7/12ths as single?

I wish I was kidding

Thank you tax troll!!!

R35

I agree with r33. Those taxes on the 450k earners arent going to do shit. Individuals who earn that much find ways around paying taxes anyway. Poor people will continue to get taxed to death for nothing, while the nation's infrastructure continues to crumble.

TT, my Grandmother has decided to start gifting my brother and me large sums of money, in order to avoid death taxes later on. My question, is this a legitimate way to pass on wealth without the tax burden? Will this bite us in the ass at some point on the future?

-- TT: my RDP and I lived in CA for the first 5 months of this year. ...
Last year IRS allowed us to file as married,--
Uh, NO, they most certainly did NOT. The IRS does not recognize CA domestic partnerships as a marriage equivilant, whether you are same gender or opposite gender.
Perhaps you DID file as Married Joint, and didn't hear from the IRS about it (yet), so you assumed they "allowed" it. You filed a fraudulent return (You checked off the box that said married, and you aren't), and are required by law to amend that to correct it. If you don't, it is very likely (but not absolutely definite) the IRS will eventually catch it, and assess additional tax PLUS a negligence penalty, which can exceed whatever tax savings you may have had from that filing. Your status on federal should have been Single, each reporting half of your community income.
To answer your question regarding 2012 filing, since you were a CA resident for only part of the year, the community property allocations need to be made only for those months (based on actual income received while a resident there, NOT just an arbitrary fractional allocation of your income for the year.) You can file jointly on your CA part year resident return. Your federal returns must be filed as Single, and include your allocated community income from CA plus your separate income from your residence in FL.

TaxTrollEA

--TT, my Grandmother has decided to start gifting my brother and me large sums of money, in order to avoid death taxes later on. My question, is this a legitimate way to pass on wealth without the tax burden? Will this bite us in the ass at some point on the future?--
An individaul can gift up to a statutory amount in total gifts to each person during a given year, without having to file a Gift Tax return (Form 709). That amount was $13,000 for 2012, and (so far, might change) for 2013.
That means that your grandmother may gift each of you a total of $13,000 a year ... not just cash gifts, but ALL gifts. For example, if she gave you a check for $13K, but also sent you a scarf for Christmas and a sweater for your birthday, she is over the exclusion and must file a Form 709 based on the TOTAL worth of all gifts.
No tax is actually paid with Form 709, but the excess gifts (over the current $13K exclusion) reduces the exclusion from estate taxes at her death. Once the entire (current $5 mil) exclusion is used up, then estate taxes are due, even during the person's lifetime!

TaxTrollEA

Tax Troll, obnoxious question....
My brother received $100K from my father in 2010 (you know the straight boy in the family). I'm certain nothing was claimed on his taxes (probably was given in cash).
I'm not planning on doing this - but can u turn someone in for not claiming a gift of $100K?

R43, gifts aren't taxable by the recipient. It's the giver who is taxed. So you'd be turning in dear old dad rather than your brother.

R44's reply to R43 is almost correct, with one minor variation ...
Whether you give someone a gift, or receive one, neither is reportable (or deductible) on your personal income tax return.
As I explained already in R42 above, someone who gives gifts to someone that total more than $13,000 in value needs to file a Gift Tax Return. For most people, the excess gift only reduces the amount you can pass to heirs free of estate taxes at your death.
Note that I am assuming that this was simply a cash gift, or the equivilant of one. There are some exceptions to gift tax filings for, say, paying someone's medical bills or college education DIRECTLY to the service provider. And if the donor retained title to something, such as buying a $100K house in his own name, but letting Junior live there rent-free (In that case, the fair rental value each year would be considered the gift, not the value of the house.)

TaxTrollEA

Thanks, TaxTroll, for fixing my response. I'm a lawyer, but not a tax lawyer. And I love you madly.

R44

FYI, following are several areas in which the IRS has announced it will be "cracking down" on what it sees as past abuses in claiming some credits and deductions. If any of these apply to you, make sure you READ THE INSTRUCTIONS for the form before you fill it out (even if via software), or - if someone else prepares your return - make sure you have the necessary documentation to show.
Schedule EIC - Earned Income Credit, if you are NOT married but claiming your child. (In some cases, you may have to produce proof the child lives with you, such as school or doctor records.)
Form 8863 - Education Credits. If you receive a Form 1098-T from the educational institution, be sure you keep it and have it available when time to do your return. You must now fill out a lot more information from that form.
Schedile C (business) or Schedule E (rentals) - IRS will be looking a LOT closer at deductions claimed on these schedules, as past experience shows this is a place where false claims are common. Make sure you can document EVERY thing you claim. On a rental property, you can't claim deductions (other than interest, taxes and casualty losses) if you were not renting (or actively trying to rent out the property) at a fair market rent when the expense was incurred.
Dividends, interest, capital gains/losses - If you have as little as $10 in any of these, the payor is required to issue you a 1099-series form showing what is reportable. Note that they have until FEB 15 to mail out these forms, so you likely have to wait till after then to file your return. DO NOT estimate from the year-end account statement, even if it shows a "Year to date" amount. The IRS will reconcile strictly to the 1099 forms, and you WILL get a notice if you are off at all. One other misconception: The income reported on the 1099 is taxable even though you did not actually take the money out of the account (i.e., reinvested it in someone else).

TaxTrollEA

TaxTroll, I love how you can fiddle while Rome burns. Poor, deluded fools like you that think that the profligate overspending can continue forever...it would be quaint if it weren't so sad.
When the US government defaults (see the "trial balloon" they released today, about making $1TRILLION platinum coins, which was picked up by such MSM shills as USAToday and the NYTimes) the esoterica of your posts will be useless. They are getting desperate.
The government is bankrupt, and they are trying to keep it alive. Why do you think they bought 100Million hollow point bullets last year? They know that the people are going to face a pissed off, angry and violent populace once the depths of their evil is exposed.
Once a loaf of bread costs $10 and a gallon of milk is $15 and gas is $25 a gallon...well, the people are going to revolt, and stupid socialists like you are going to have to explain why you supported their evil policies.

R48, please take your ill-informed and rambling diatribes elsewhere. TaxTroll didn't create the world, he just explains it to many of us needing to understand. He didn't piss in your cornflakes, so piss off.

R49
How long do you think this charade can continue?
Do you think the government is going to give you two weeks notice that your dollars are worthless and that the benefits are going to end?
No, it will come overnight, and the unprepared will be fucked.
Look at the official charts. Look at the exponential growth of US debt. Look at how even a small increase in interest rates would mean that 100% of taxes would go to debt service.
Why do you think gold and silver continue to rise in price? Why are the vast majority of USTreasuries held by the Federal Reserve?
If those USTs were sold on the open market, the interest rate would rise rapidly, and the economy would collapse.
Soon, though, the Federal Reserve will no longer be able to print trillions of dollars and the economy WILL collapse.
Stick your head in the sand. Call me a freeper. Bitch and whine and moan.
It won't change reality.

Asshole R50, start your own thread. TaxTroll is one of the bet propel on this board, always helping others. Don't pollute his thread. Go away.

R51-
When did injecting reality become pollution?

R52- when it is completely off-topic. TaxTroll is using the thread to explain specifics provisions and their effects on individual. If you want to go off on your own diatribe, start your own fucking thread. But then again, you'd probably have to go to the backyard and dig up $18 in gold coins to be able to do that.

So, I need to clip off 1/78th of a coin? Nahhhhh, the silver quarters work better.
If this site took BitCoin it would be better.

No. It would just be better if you left.

R55-
If you would explain why raising taxes on 77% of the population is a good thing it would be nice.

[quote]That amount was $13,000 for 2012, and (so far, might change) for 2013.
It's $14K for 2013.
On another matter, you forogt to mention the new 0.9% self-employment tax.

R56, your posts are both inaccurate and unwanted. Start your own thread. So those of us here can ignore you.

R58-
Point out one inaccurate statement. Please.

How about taxes going up on 77% of the population, just for starters. And contributions to social security don't count.

SO tired of apologist bullshit.
The Democrats have basically turned into 80's Republicans. And the Republicans are far right nutjobs.
Obama bent over from the start and conceded virtually everything. He even offered up cuts in SS and Medicare.
The banks, the big corporations, and Wall Street run this country now. And we all know it.

[quote]The 2% reduction in employer portion of Social Security tax did NOT get extended.
2% of what? Your gross income?

Trolldar is awesome R60 et al has been posting this paranoid crap over DL for weeks. Must be selling either guns or gold. He's half the poss on the "shadow inflation" thread.

And he's the OP of the thread about NAIRing your asshole. Awesome.

R63

R64, you do realize that it was lifted from another site.
Then again, when dealing with sub morons like you (since you've posted stupid bullshit at R51/53/55/58/60/63/64) I guess you were just too ignorant to figure that out.
Why does socialism produce morons like you?

Good job, R65. When you can't win on substance, just trot out the "socialism" label and call them "morons".

Your%20Idol%2C%20Rush%20Limbaugh

R66
Can you offer a better appellation?
The fact is - taxes for EVERYONE who works are going up by at least 2%.
The socialist morons agree that this a good thing.
Where am I wrong?

For R66
See the link. The government is very good at making us hate "the other" but we should be trying to stop them.
They aren't leaders, they are parasites, barnacles, deadly bacteria. They need to be stopped.
See the link.

Now I have no idea what these paranoid rantings are about. First he's against the "socialists" and fomenting an oncoming revolution, then he's against the rich parasites who avoid taxes.

To clarify r50: this is not a tax policy thread.

--That amount was $13,000 for 2012, and (so far, might change) for 2013.--
(R57 replied)
-It's $14K for 2013.-
You are correct. Thanks. I was sure it had gone up, but couldn't find the figure when I posted. My software for the form isn't in yet.
- On another matter, you forogt to mention the new 0.9% self-employment tax. -
Old news, having nothing to do with the cliff legislation. (So is the 3.8% Medicare tax on investment income, which I did cover above, but someone had asked about that.) It was part of the financing for the Affordable Health Care legislation.
And, for the record, this is an additional Medicare tax, applicable not just to high income self-employeds, but also to wage earners at that level.
The additional tax kicks in only ABOVE #200K in wages (or net self-employment income, after allowable deductions); for married taxpayers, it kicks in at $250K.
For employees, the employer will withhold the additional .9% from wages over that level, but the employee is responsible to pay if for some reason this is not done. For self-employeds, the tax is computed and paid with the tax return at the end of the year, likely as part of Schedule SE.

TaxTrollEA

--The 2% reduction in employer portion of Social Security tax did NOT get extended.--
-2% of what? Your gross income?-
It was a temporary reduction in the employee portion of Social Security withholding, based on your Social Security wages (which this year top out at $110K). All that happens is that the tax returns to the same level it had been in 2010, and for more than a decade before that.
This works the same way for self-employed persons, who got to reduce their SE tax (which is Social Security + Medicare) by 2% for 2011 and 2012. It's now back to a total of 15.3%, as it was before 2011.

TaxTrollEA

Just some perspective, for those who might be interested ...
In 2013, the HIGHEST marginal rate of income tax anyone will pay, with all applicable Medicare surtaxes, is 43.7%.
From 1970-1986, that was 50%.
From 1965-1969, it varied from 70-77%.
From 1951-1964, that was 91%
From 1941 -1950, it varied from 80-94%!
So, the highest possible tax rate for 2013 will be roughly HALF of what it was for a decade and a half in the middle of the past century.
Back then, a loaf of bread was less than 40 cents, a quart of milk no more than 25 cents, a gallon of gas was less than 50 cents. And, when you were doing your taxes, a quart of good whiskey was under $5. :)
EVERYTHING cost a lot less back then ... but your income tax rate today is less than HALF what higher income people paid back then.
Just sayin' ...
(I now return you to your originally scheduled flame wars. :)

[quote]Point out one inaccurate statement. Please.
Here you go. The problem with you, actually, is the opposite: I had trouble finding an *accurate* statement!
"Poor, deluded fools like you that think that the profligate overspending can continue forever..." False. Nobody has claimed that. And the current spending levels will not "continue forever."
"When the US government defaults" - False. This has nothing to do with anything under discussion here and is purely a matter of politics. Congressional Republicans can force a default but it has nothing to do with tax policy.
"see the "trial balloon" they released today, about making $1TRILLION platinum coins" - False. The Obama administration has already ruled this out.
"They are getting desperate." False. The trillion dollar platinum coin is the opposite of "desperate," in that it neatly solves the debt limit blackmail. It's a shame that the Obama administration has ruled it out.
"The government is bankrupt..." Not only false, it's stupidly false.
"They know that the people are going to face a pissed off, angry and violent populace once the depths of their evil is exposed." False. Overwrought hyperbole from a drama queen.
"Once a loaf of bread costs $10 and a gallon of milk is $15 and gas is $25 a gallon..." False. Same as above.
"stupid socialists like you are going to have to explain why you supported their evil policies." False. You haven't yet shown any evidence that anyone here is a "socialist" and you haven't been able to provide any examples of "evil policies."
"How long do you think this charade can continue?" False. There is no "charade."
"Do you think the government is going to give you two weeks notice that your dollars are worthless and that the benefits are going to end?" False. No such meltdown is possible under current economic conditions.
"No, it will come overnight, and the unprepared will be fucked." False. No such meltdown could possibly occur without significant advance warning signs.
"Why do you think gold and silver continue to rise in price?" False. Gold peaked more than a year ago and has been highly volatile since, but has been flat or down, overall, since the peak.
"Why are the vast majority of USTreasuries held by the Federal Reserve?" False, and stupidly so, since it's not even close to being true.
"If those USTs were sold on the open market, the interest rate would rise rapidly, and the economy would collapse." False. The Federal Reserve has carried out these actions dozens of times in the past, each time without incident and without the ill effects you've been predicting.
"Soon, though, the Federal Reserve will no longer be able to print trillions of dollars and the economy WILL collapse." False.
"It won't change reality." False. These are fantasies of yours, not reality. None of your predictions of the past few years has come true.

[quote]Can you offer a better appellation?
Yup. Realists.
[quote]The fact is - taxes for EVERYONE who works are going up by at least 2%.
The fact is that a temporary tax cut, a tax cut that was always intended to be temporary, has expired. The fact is that nobody "raised taxes;" they simply let current policy stand and the tax cut expired precisely as it was originally set up to do.
[quote]The socialist morons agree that this a good thing.
I'd say that funding Social Security is a good thing. The overwhelming majority of US voters agree with me. Sucks to be you.
[quote]Where am I wrong?
There isn't enough space on this forum to document the number of ways you're wrong, so we'll have to settle for laughing at you for your cluelessness and for your drama queen "sky is falling" silliness.

[quote]As far as the 2% Social Security tax bump, again, this was a temporary reduction that was NEVER meant to be permanent. Obama wanted to extend it another couple of years, Congress said no.
Depleting the Social Security trust fund even further is Obama's idea of a good financial plan? Thank god Congress had some sense for a change.

R76, the temporary payroll tax cut was offset by money from other sources. The trust fund wasn't being depleted.

That makes no sense at all R77. What sources?

General revenue, r78. It was made explicit in the bill that the trust fund and Social Security funding would be unaffected by the temporary stimulus.

r73 / TaxTroll, I agree. But what do you say to the doubting thomases who say, well to really get the Big Picture, you have to also look at how deductions are so much higher than in the 40s and 50s? And also look at estate taxes, sales taxes, etc.?

Robbing Peter to pay Paul...great idea R79. As I said "makes no sense". It's all just smoke and mirrors.

R81, they wanted to put money into the hands of those who would spend it. The temporary payroll tax cut was one way to do that. They could just as easily have cut a check for everyone or employed half a dozen other techniques, none of which are any better or worse than any other.
It was a temporary stimulus, something that was warranted by the economic conditions at the time. As long as Social Security remains fully funded, what difference does it make? The money went out there and it was spent, just as was intended. It's more than just "smoke and mirrors;" it's basic macroeconomics.

An update from the IRS today advises that, due to the late passage of the tax bill and needing additional time to program computers for the change, they will not actually be accepting return - electronically OR on paper - until Wednesday, January 30th. (That's 8 days later than they originally announced.)
Actually, some taxpayers will have to wait longer than that. If your return includes Form 5695 (Energy Credit), Form 4562 (Depreciation) or a few other forms listed at irs.gov, processing of the return (even though accepted after 1/30) could be delayed until late February or even early March. Updates will be posted at IRS website.
One other item about IRS processing, which they previously announced: Unlike in past year, they will no longer publish a timetable as to when refunds will likely be deposited or issued by check. Depending on the items on your return, plus volume of returns that week, they are saying that direct deposits could take anywhere from 3 DAYS to just over 3 WEEKS, with refund checks about a week longer than that. Things they will be looking at closely this year (which will likely mean delays): Energy credits, education credits, earned income credit (if claiming a child and not married), and rental or business schedules showing a loss.

Wow, I'm amazed that some people (that are under 60) still believe that they will get one penny from SocSec. How naive!
Anyone who tells you that SocSec will still be viable in 10 years is lying.

[quote]Wow, I'm amazed that some people (that are under 60) still believe that they will get one penny from SocSec. How naive!
ROFL.... Wow, I'm amazed that some people still believe that SocSec [sic] won't be viable in 10 years!
[quote]Anyone who tells you that SocSec will still be viable in 10 years is lying.
Anyone who tells you that SocSec [sic] will not still be viable in 10 years is lying.
The worst-case scenario, dear, is that Social Security will only be able to meet 75% of its obligations beginning in 20 years or so. Since that's still greater than the benefit levels of today, and since fixing the shortfall is trivially easy, and since Social Security works and is incredibly popular, your "belief" that it will not be around speaks volumes about you but, alas, says nothing at all about the real world.
You really should join us out here someday. You might even like it here.

R85, your ignorance would be amusing if it weren't so dangerous.
In 2011 the SocSec "Trust Fund" went from being a net buyer of government debt (meaning they were taking all the tax money they stole from people and using it buy "quality" US government debt) to a net seller of US debt.
Since there is no "lock box" ( as that mental giant Al Gore said) but just a pile of IOUs that means that SocSec payments are now adding more the national debt--- which has tripled to over 16TRILLION since 2000---- it means that all Soc Sec payments come out of the taxes paid each month.
Your fundamental inability to understand economics is astonishing.
Did you go to Yale?

[quote]your ignorance would be amusing if it weren't so dangerous.
ROFL.... So you keep claiming, dear, and yet every time you try to "prove" just how "ignorant" I am, you get your ass handed to you. Let's see if it happens again, shall we?
[quote]In 2011 the SocSec "Trust Fund" went from being a net buyer of government debt (meaning they were taking all the tax money they stole from people and using it buy "quality" US government debt) to a net seller of US debt.
Yes, dear, I know. The Social Security fund ran a surplus for a couple of decades, a surplus which was invested in government bonds.
[quote]Since there is no "lock box" ( as that mental giant Al Gore said) but just a pile of IOUs that means that SocSec payments are now adding more the national debt--- which has tripled to over 16TRILLION since 2000---- it means that all Soc Sec payments come out of the taxes paid each month.
As usual, dear, you're wrong. Not only is there indeed a "lock box," but you're flatly incorrect about how much of the current Social Security payments are coming from the government paying out on those bonds. It's just a small percentage, dear, and it's never going to grow larger than roughly 25% of the total.
Has it really escaped your notice, dear, that Social Security has its own revenue stream? A revenue stream that is fully capable of paying fully 75% of the projected benefits into perpetuity?
[quote]Your fundamental inability to understand economics is astonishing.
ROFLMAO.... Oh, the irony....
Your every post here demonstrates just how little you know, dear, and you *always* get your ass handed to you, just as I did in this post. Sucks to be you....

Tax Troll, I live in a state with a super-high sales tax (10%) and a very low income tax. Has my accountant been missing an opportunity by deducting my state income tax?

[quote]I live in a state with a super-high sales tax (10%) and a very low income tax. Has my accountant been missing an opportunity by deducting my state income tax?
Maybe yes, maybe no. You can deduct the sales taxes instead of state income tax, but only if you itemize deductions on Schedule A. If, even with the state tax, you are better off with the standard deduction, that's what you would use.
The state sales taxes can be the actual amount your tracked from purchases all year, or the amount allowed from IRS tables in the instructions or website. Be sure to read the fine print for your state, which might instruct you multiply the table amnount by a factor to include county or city sales taxes. And, whether you use table or actual, you can increase the deduction with sales taxes paid on purchase of a motor vehicle.
Other itemized deductions often missed include:
Personal property taxes (taxes based on value of property, often a part of license plate fees.)
Include in medical: cost of contact lenses, contact lens solutions, contact lens insurance, travel for medical care, all copays for prescriptions or doctor. Lasik surgery is deductible, even though insurance may not cover it.
Include in employee expenses what you pay for: professional dues and publications, supplies used at work, employment agency fees, job seeking costs (whether or not successful), cleaning of employer-provided uniforms, safety shoes to prevent injury to feet.
Out-of-pocket expenses related to volunteering for a charity, such as unreimbursed supplies, mileage to do the work, etc.

[quote] The IRS just accepted my tax return, so I guess that Jan 30th date wasn't entirely accurate.
Anything is possible at this point (IRS "rules" seem to be changing daily!)
But I am told that there are two software companies (one professional, the other TurboTax) that is being allowed to transmit returns, so the IRS can test the changes they made, in preparation for the Jan 30th rollout of e-filing for 2012. Those people will get what LOOKS LIKE an acknowledgement from the IRS, but the IRS says it is actually kind of a "conditional acknowledgement" ... meaning that it reflects that they didn't find anything obviously wrong to reject the return. However, the IRS still insists (as of this morning) that they will NOT actually process ANY return (on paper or e-filed) and start the refund process until Thu, Jan 31, 2013.
And, while I am on the subject, the IRS also insists that some returns won't even be processed then, and will be delayed until late Feb or even early March. If your return contains any of these forms, you're in that category: 4562 Depreciation, 5695 Energy Credits, 8582 Passive Activities, 8839 Adoption Credits ... as well as 26 OTHER FORMS, most of which are for rather rare tax credits, unsually involving a business.

TaxTrollEA

ok..stupid question here, I earned about $3K less this year than last. I quickly looked over the pay slips and did'nt see the difference. Here's the stupid question, was there some kind of tax hike or increase in ss, anything last year that wasn't there in 2011?
I'll have to download all my slips and compare everything but to lose $3K?
the only thing different between this year and last was I moved an IRA to a ROTH but I paid the taxes to the IRS. This year I was hoping to recoup that cost but I actually earned less.

[quote] ok..stupid question here, I earned about $3K less this year than last. I quickly looked over the pay slips and did'nt see the difference. Here's the stupid question, was there some kind of tax hike or increase in ss, anything last year that wasn't there in 2011?
I'll have to download all my slips and compare everything but to lose $3K?
the only thing different between this year and last was I moved an IRA to a ROTH but I paid the taxes to the IRS. This year I was hoping to recoup that cost but I actually earned less.
Unsure what you mean.
"Earnings" are your gross income amounts BEFORE taxes (and things like deferrals into 401K plans, stuff you pay pretax like medical insurance, etc.) Your "Take Home" pay is after all that stuff.
So if your Take Home pay went down, the logical thing to do is look at first is your gross and see if THAT changed. Maybe overtime pay, a bonus, paid vacation time you didn't actually take off? If so, that is your answer. If not, you have to look at what was withheld.
No, tax withholdings were not higher in 2012 ... unless of course you filled out a form and asked them to take out more. Or, of course, if your earnings went up, causing more taxes to be due.
There can occasionally be other factors, such as an uneven number of pay periods (Because of the way you get paid, you had one year that covered 53 weeks and the next one was 51 weeks.) Yes, I know $3,000 is a lot of money, but I also don't know how much you make, and if perhaps that can be two weeks' pay.
Your best bet is to do, as you mentioned, just compare the stubs and see what changed.

TaxTrollEA

Well if you moved to a ROTH account, wouldn't that mean your take home pay would be less, since your ROTH is post-tax vs pre-tax?

Tax Troll turns me on!

Show%20me%20your%201040%2C%20sexy%21

Why is the SS 2% increase for the employer's portion going to affect net for the employee?

A ROTH conversion would have no bearing on why his earnings from HIS JOB went down.
The end of the 2% reduction in employee Social Security tax is THIS year, 2013, and would have no bearing on differences between 2011 or 2012, since it was in effect for both.
But, in rereading R93, it's not clear whether he is comparing 2012 to 2011 (as I assumed he was), or somehow estimating how his total earnings for 2013 (A bit early to do that??) and comparing 2012 to 2013. Obviously, the 2% would make a difference in 2013 in one's take home pay, but the maximum difference would be just over $2,000. Still doesn't explain his difference in full.

TaxTrollEA

[quote] That's why "self-employed" people pay 10.2%
2012 Self employment tax was 13.3%.
2013 (and after) Self employmemnt tax is back to 15.3%.
SE tax is made up of Social Security (12.4%) and Medicare tax (2.9%). Those figures are exactly TWICE what an employee has withheld, as the employer pays the other half for them.

TaxTrollEA

Hi Tax Troll:
You were kind enough to respond upthread regarding my short sale question (1099-C).
My partner and I each received our 1099-C, but the amount reported as "forgiven" is significantly lower than what we expected. The mortgage company is completely ignoring my calls for a correction or explanation. A "satisfaction of mortgage" has been filed with the county, and our credit reports show a $0 balance, but this makes me nervous that not all was forgiven. Any idea of what we do if the mortgage company is unresponsive? Still file with the IRS based on what is reported? File a complaint with IRS? Thanks!!!

R35

[quote]My partner and I each received our 1099-C, but the amount reported as "forgiven" is significantly lower than what we expected. The mortgage company is completely ignoring my calls for a correction or explanation. A "satisfaction of mortgage" has been filed with the county, and our credit reports show a $0 balance, but this makes me nervous that not all was forgiven. Any idea of what we do if the mortgage company is unresponsive? Still file with the IRS based on what is reported? File a complaint with IRS?
In my experience, banks and other lenders are indeed making a lot of errors on these 1099-A and (especially) 1099-C forms. But, in the vast majority of cases, the lender is showing a HIGHER amount than really exists. Yours is unusual.
If the amounts aren't even close to what the year-end mortgage statement shows, I'd try calling them again, and say that your 'tax advisor' insists you try to reconcile the difference before he files a formal complaint with the IRS that they issued an incorrect 1099-series form and won't correct it ... which can cost them more than $1,000 in combined penalties. That *usually* gets their attention.
The fact that the county shows the lien as satisfied means nothing. When you default on a loan and the lender cancels the debt, as reported on 1099-C, the lien is lifted, since there is no more debt.
If you have to file in the interim, I'd show the sale on Form 8949 (show it sold for loan balance at time of default, and any resulting loss is NOT deductible.) On the "Misc income" line of Form 1040, you should attach a statement showing the original amount of debt forgiveness shown on Form 1099-C, then subtract it out again, indicating "See Form 982". On the latter form, line 1(e), you show the excluded amnount. (Unless you followed that, I'd suggest professional tax prep for you this year.)

TaxTrollEA

Have college tuition that might qualify for a credit on your federal income tax return for 2012?
I've got good news .. and not so good news.
The "cliff" legislation did renew the American Opportunity Tax Credit, which is a lot more flexible and generous than the Hope and Lifetime Learning credits. In most cases, it is better than simply claiming a deduction for the credit.
But, because of the late passage of that bill, the IRS has (just) announced it is adding Form 8863 to the list of forms that it will NOT be able to process until (brace yourself) "late February or early March." They said that federal returns e-filed with that form before then will be rejected. And if you mail in a paper return, it will simply be held until then, when they start processing the form.
As I said earlier, I think the date estimate is more of a "worse case scenario." But the IRS is NOT having a good year, that's already quite obvious, so anything is possible. Just wanted to give you the heads-up ...

TaxTrollEA

We heard what Obama wanted us to believe, "no tax increase for the Middle Class." Everyone who opened their paychecks this month know we were conned.

Exactly, R104
The apologists for this bullshit are cunts.

r104, I speak TAX, but not CRAZY, and I refuse to debate this with you.
But let me ask you a question ...
Let's say that your favorite cocktail lounge charges $6 for drinks. It has been that price for almost a decade, since it opened.
When the bar reaches its tenth anniversary, they run a ONE weekend special, with all drinks $4 for THAT LIMITED TIME. This is published in their ads, and on signs in the bar.
At the end of the week, the price goes back to $6, as it has always been until that week.
Do you get pissed and suggest that your friends boycott the bar, because they RAISED PRICES on you? Or are you thankful they did lower them for that weekend?
Figured the alcohol analogy would be easier for you to understand, but the scenario is pretty much what just happened with payroll tax, specifically Social Security tax. IT HAS BEEN 6.2% SINCE 1990 ... actually 21 years ... through 2010. Only TWO years, 2011 and 2012, the tax was reduced by 2%, which the President said up-front was a TEMPORARY REDUCTION. which was hoped to help people through the recession. It was never meant to be a permanent change to the Social Security tax for employees. (Employers have been paying 6.2% all along, and never had a reduction.)
And, for the record, Obama made it clear that he wanted to EXTEND the temporary reduction in SS tax, at least through 2013. Congress would not accommodate him.

TaxTrollEA

"When the bar reaches its tenth anniversary, they run a ONE weekend special, with all drinks $4 for THAT LIMITED TIME. This is published in their ads, and on signs in the bar."
Because the bar cannot FORCE ME to buy drinks, or give them money. Are you really that stupid to use such a weak analogy?
The tax increase by Obama on the poorest people is bullshit, and people like you that defend him are morons.

Yes, TaxTroll has been shown to be a good Nazi!
Or is that fascist? As long as the trains run on time...

Please peddle your crazy someplace else, R107/108. We're all full up here.
TaxTroll, a question please. My partner and I have a weekend house with some farmland attached. A local farmer pays us a few thousand a year to rent it. While my partner and I co-own the property (and each deduct half the mortgage interest, property tax, etc.), the farmer sends the check each year just to me, along with a 1099 for the full amount. When I received and deposit the check, I immediately write my partner a check for his half of the rent, and each of us declare our half of the rent on our own returns.
Does the fact that I receive a 1099 for the full rent but only declare half of it on my returns (after immediately passing through the other half to my partner) present much risk with the IRS, other than just having to explain it if audited? I suppose I could ask the farmer to do two checks and two 1099s if I had to, but I hate to bother to ask him if it's not a real risk to me.
Thanks for all you do for your loyal fans here at DL!

[quote]TaxTroll, a question please. My partner and I have a weekend house with some farmland attached. A local farmer pays us a few thousand a year to rent it. While my partner and I co-own the property (and each deduct half the mortgage interest, property tax, etc.), the farmer sends the check each year just to me, along with a 1099 for the full amount. When I received and deposit the check, I immediately write my partner a check for his half of the rent, and each of us declare our half of the rent on our own returns.
Does the fact that I receive a 1099 for the full rent but only declare half of it on my returns (after immediately passing through the other half to my partner) present much risk with the IRS, other than just having to explain it if audited? I suppose I could ask the farmer to do two checks and two 1099s if I had to, but I hate to bother to ask him if it's not a real risk to me.
Technically, you should be issuing your partner a 1099MISC for his half, and send the original to the IRS. But that is a bit of a hassle, especially since 1099 forms sent to IRS must be in "dropout red ink" originals, which require a typewriter to complete, or you need to buy software that would be good for only that year.
You could ask for separate 1099 forms .. OR ...
Assuming the 1099-MISC shows this as "RENT" (and NOT "Nonemployee compensation" which would be incorrect), you would report this on Sch E, page 1. I'd suggest you report 100% on the line for gross rents, which matches the 1099 you received. Further down, on the lines where you write in expenses, indicate "Paid to co-owner" and the half that isn't yours. The net would be the remaining half you are liable to report. Attach a statement giving his name and SS# as reporting the other half. This is likely to avoid any possible notices from the IRS.

TaxTrollEA

Thanks very much, TaxTroll! If I don't do it (and continue as I have), is there a fine or penalty? Or would I just need to amend/issue a 1099 to him?

R109

[quote]Thanks very much, TaxTroll! If I don't do it (and continue as I have), is there a fine or penalty? Or would I just need to amend/issue a 1099 to him?
Good question. And the answer is no.
Since you are not "in business" (a passive rental is not considered a business), you have no direct responsibility to issue 1099 forms. Worse case scenario is that you might have to deal with an IRS notice, asking why you didn't repot all of the money ... and my suggestion with the Sch E would likely avoid that completely, or make them stop if they do contact you and you point it out.
Mentioned it before, but it is worth repeating. Last year was probably the WORST I have ever seen the IRS experience, in terms of errors, notices that contradicted each other, taking six months to do something that used to take a couple of weeks at most, etc. And, so far, looks like this year will be worse. You are better off doing what you can to avoid having to deal with them ... not a pleasant encounter under the best of circumnstances, but really hell these days.

TaxTrollEA

Thanks very much for the great answers. You are appreciated.

R109/111

Thanks Tax Troll! Regarding my 1099C and your last response it seems I do need to hire an expert. The mortgage company has responded to my numerous questions with "it's correct" with no further explanation, or assistance. I even went to to executive complaint department. Same answer. That, mixed with your statement that the filed Satisfaction of Mortgage with the county means nothing has me a wreck that the total debt was actually not fully forgiven, only a portion as reflected on the 1099C. Although my fight for clarification from Citimortgage continues.
Thank you again. You are so appreciated.

R35/R101

[quote]The mortgage company has responded to my numerous questions with "it's correct" with no further explanation, or assistance
Very familiar, as I have heard it many times. From big banks to small mortgage lenders, the mistakes coming through on the 1099C forms are really ridiculous. (I had one lender report a figure that seemed to be about twice what it should have been. I called them several times, was assured it was right, eventually had to threaten them with a lawsuit, then they agreed to check it. I got a fax that essentially said "Oops. Due to a computer error, we just discovered that the amounts on ALL OF THE 1099C FORMS WE ISSUED had been DOUBLED by mistake." Geez.)
When you go to a professional, tell them in advance that there are some discrepancies between the 1099C and your mortgage balance. Bring with you the most recent mortgage statement you have, showing balance. See if the title company has a settlement sheet for the short sale/foreclosure, showing the amount of debt discharged. And compare those to the 1099C. If you no longer own the house, you can't have any liability for the loan, since it would have gone away when the house did.

TaxTrollEA

HAVE TAX QUESTIONS? Please post them ONLY in this thread OR the separate "Questions for Tax Troll" one I started yesterday. Those are the only ones I will check, daily.
I likely will NOT see any other threads, even if you use my name. The Search function isn't the same this year, and makes it impossible to do that. I'll only depend on the Thread Watcher to alert me to new questions.
Thanks!

TaxTrollEA

You really have restored my faith that good people exist Tax Troll ... with all the asses at Citimortgage, I feel restored with the help you have provided. Seriously, thank you!

R35%2C%20R114%2C%20etc.

TaxTroll-
If taxes were assessed at a set percentage on everyone, would you lose your job?
Doesn't that make you a shill for even more complex taxes?
How many trillions have been spent on useless bullshit provided by tax lawyers?

Tax Troll: I just wanted to share (in case it helps others) that I finally got a reasonable and helpful person at Citimortgage. They were able to outline that the difference (lower) was reflecting my PMI (mortgage insurance), and what was forgiven was what the PMI did not cover. So, the 1099c was correct after all, it just took ages to get someone to explain the math.
Again, my sincere thanks for all you do.

R35/R101

Tax troll, please tell us why we shouldn't implement a flat tax?
If everyone paid 15% then there would be no need for high paid trolls like you, and we could end the IRS.

[quote]Tax troll, please tell us why we shouldn't implement a flat tax?
Because it would be incredibly stupid and badly hurt the poor. Next?

O Wise Tax Troll,
If you borrow money from a financial institution to pay off a large medical bill for an emergency operation, can you deduct the loan interest as a medical expense?

[quote]If you borrow money from a financial institution to pay off a large medical bill for an emergency operation, can you deduct the loan interest as a medical expense?
No. However, if you borrowed using the equity in your home as collateral, it could be home equity debt deductible on Sch A as interest.
Let me also point out a question you didn't ask above: "Do I deducr the actual medical expense over the period I'm paying back the loan?" Answer to that is No ... since you borrowed the money from a third party, the doctor got all of his money in year one, so that is when the medical expense is deductible. Only if you were making payments directly to the doctor would you deduct it ratably as you make payments.